The Center for Retirement Research cites a study that shows Baby Boomers are woefully underestimating how much health care will cost when they retire.
The center, located at Boston College, cited in its Squared Away blog what it called “what may be the first comprehensive survey and analysis of what Americans expect to pay”. It noted that both Baby Boomers and Generation Xers “were seriously underestimating the amount of savings they would need to accumulate in order to cover health in retirement.”
The study comes courtesy of the American Society of Law, Medicine & Ethics
Boston University School of Law. An abstract with the ability to download the study is here.
True, Medicare, government backed health care that begins at age 65, pays 60 percent of medical-related costs. But that leaves 40 percent health care costs uncovered, which becomes an issue for those who live longer, according to the CRR.
That’s you, American women.
“Even though most American retirees benefit from Medicare coverage, a mounting body of research predicts that many will face large and increasing out-of-pocket expenditures for healthcare costs in retirement and that many already struggle to finance these costs,” says the survey.
“It is unclear, however, whether the general population understands the likely magnitude of these out-of-pocket expenditures well enough to plan for them effectively.”
The center’s reading of the survey has these observations:
- By 2020, the range of out-of-pocket spending is expected to vary from $2,453 per year for a typical person with low health care needs to $7,272 for the typical high spender;
- Over 52 percent of people surveyed who are already retired or are Baby Boomers or Generation Xers substantially underestimated how much they would spend every month, compared to what the experts predict for typical retiree medical costs in the future.
- Women, who tend to live longer, will pay more to supplement their Medicare coverage, but they mistakenly believe that the total amount they will spend over their years of retirement is lower than men’s totals.
Medicare is -- as it has been in the past -- part of the discussion in Washington, D.C., on ways to balance the federal budget.
House Republican and former vice presidential candidate Paul Ryan of Wisconsin proposed a budget Tuesday that overhauls Medicare for future retirees.
A USA Today review of the Ryan budget proposal shows that starting in 2024, seniors would be given a federal subsidy to purchase health care from the private market, instead of the guaranteed benefit system that currently exists. It also calls for wealthy seniors to pay more for premiums.
Ryan's plan also keeps in place $716 billion in Medicare cuts in payments to providers included in the president's health care law to achieve balance. As a vice presidential candidate in 2012, according to USA today, Ryan opposed these cuts and attacked President Obama for it in his convention speech.
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